In an effort to keep business practices legally compliant, companies need to share documents that ensure they are adhering to a wide array of standards. Conducting due diligence, leaving behind a full audit trail, and compiling a list of people with access to sensitive documents are all crucial aspects to cleanly running a business. Businesses need a secure platform on which to post documents, share them, and communicate accordingly.
Virtual Data Rooms for Legal M&A and Due Diligence
Merger and acquisition (M&A) transactions can be highly complex. Examining the legal environment, including all potential risks, is critical for deal closure. Both the acquiring company and the target company need to fully understand each other’s current legal challenges or obligations, then perform a similar analysis for the hypothetical, post-merger legal situation.
This type of legal due diligence may require additional legal experts knowledgeable about specific regulatory, environmental, consumer, labor and IP. Unfortunately, the legal due diligence process for M&As is often slowed down because of improper or inefficient sharing of documents. A cloud-hosted, document-sharing platform is not enough. A virtual data room (VDR), such as one from CapLinked, can provide the right tools with the right features that are necessary to support the work of legal professionals
Made for Secure Legal Document Sharing
VDRs help lawyers and legal firms share important and private documents. Legal documents, such as contracts, should always be kept private, but for transactions with a number of parties involved, the need for organization and privacy is all the more critical.
M&A
Evaluating the legal structure and environment of the companies both pre- and post-merger is critical to the completion of an M&A transaction.
Legal Proceedings
Even without a transaction or liquidity event, legal proceedings between parties greatly benefit from a VDR, as the documents are shared properly, securely, and in a timely manner.
Real Estate
Real estate transactions can become quite complex, especially in certain states. As different investor groups become more interested in participating in the market, a secure document sharing solution is needed, especially as those investors may be located globally.
Features for Legal Compliance and Due Diligence
The due diligence process can become complex. While lawyers and their clients are no strangers to reviewing pages and pages of documents, solutions are needed to streamline the process so that concerns can be shared quickly and transactions can close in a timely fashion.
Secure Document Sharing
All participants involved in a transaction can rest assured that the documents they upload remain secure. Documents remain secure while at rest (stored, not being accessed) and in transit (shared with an individual and accessed).
Document Management
The administrator of the VDR is able to manage documents and upload, download, annotate, grant and revoke access rights, change settings (e.g., download), manage users and leverage other administrative features.
Fundraising Management
Company principals, bankers and valuation professionals can present a company’s financials securely to potential investors and advisers who are interested in providing capital. Management of the funds received, including bank and treasury statements and proof of transactions, can be facilitated by the VDR also.
Financial Documents
Any and all accounting statements, in nearly any format (e.g., Excel, PDF), can be uploaded and shared for evaluation.
Deal Management
The acquiring company, along with its investment bankers or those managing the transaction, can host any and all documents necessary, and securely manage access for both groups and individuals. As certain advisers complete their review, or as investors pass, the VDR can revoke access and ensure the security and privacy of documents.
Due Diligence Process: Sell-Side and Buy-Side
Both companies involved, in addition to their bankers, lawyers, accountants and other advisers, can prioritize and expedite any and all documents necessary for a transaction to take place.
Investor Reporting
Sometimes investors, especially those that are institutional, will require additional reporting. In order to prepare the reports, the financial team can share documents in the VDR and have them reviewed by the company’s outside advisers.
Industry-Leading Security Features
Security is the most important aspect of a VDR. Aside from adhering to industry standards, other features of the VDR ensure the safest, most secure, and most private document sharing experience for all involved.
With a VDR in place, transaction participants need not worry about the security settings of their own devices, browsers, operating systems or applications — the VDR takes care of all this, for added peace of mind. Less frustration leads to fewer mistakes and a stronger security posture.
Security Certificates
Standards and compliance measures for VDRs include the following. This ensures that the due diligence process adheres to the relevant industry standard for security.
- SOC 1/SSAE 16/ISAE 3402
- SOC 2 Type II
- FISMA, DIACAP and FedRAMP
- HIPAA/ITAR
- DOD CSM Levels 1-5
World-Class Data Encryption
Enterprise-level security includes the encryption of documents, which is essential to maintaining the confidentiality and integrity of the documents being shared and reviewed within the VDR.
Controlled Access
With dozens, sometimes hundreds, of individuals involved in a transaction, the VDR must be able to grant, revoke or monitor access as needed, both at the group and individual levels.
Comprehensive Activity Tracking
A VDR should enable administrators to track all actions and changes made within the workspace, both at the individual and group levels. These activities might include document views, downloads, uploads, permission changes and pages viewed.
This tracking feature can also serve as an efficiency booster: The workspace administrator can determine who is doing what they need to do and who isn’t. If certain documents seem to keep people stuck and cause delays, perhaps there is an issue with accessibility or legibility. As such, the workspace administrator can uncover this irregularity and notify the appropriate document owner.
Trust Only the Best in VDRs
CapLinked knows virtual data rooms. While basic enterprise document sharing is familiar to most business professionals, the advanced features of a VDR might be unfamiliar to many lawyers and law firms, especially the technology behind the security features.
Luckily, CapLinked’s solutions are simple and ready out of the box. Minimal training is needed, if any, and a VDR can be launched in less than a day so that a transaction can proceed without interruption.
FAQs
What is a legal due diligence report?
A legal due diligence report covers a thorough analysis that the legal counsel performs on behalf of a company involved in an M&A transaction or liquidity event.
What is standard due diligence in legal?
While standards shift from industry to industry, standard due diligence considers all legal factors, challenges, risks, and obligations that both the acquiring company and the target company can incur should they consider a business combination.
